Inactive asset managers to face BSEC probe

The stock market regulator will look into the business activities of asset management companies (AMCs) that do not manage any funds or are not in operation after getting licences.

The Bangladesh Securities and Exchange Commission (BSEC) has recently identified 10 such inactive asset management companies.

But the companies are enjoying the quota facility in initial public offerings (IPOs) and qualified investor offers (QIOs) in the capital market as qualified investors.

They are Alif Asset Management Company, Invest Asia Capital Asset Management, BDV Asset Management Company, Meghna Asset Management, Bloominance Asset Management Company, Blue-Wealth Assets, Belt and Road Asset Management Company, Maslin Capital, BMSL Asset Management Company, and MBL Asset Management Limited.

Market insiders said the mutual fund industry cannot create confidence among investors for failing to make a good return in the last decade.

Consequently, liquidity crisis, lack of sufficient skilled workforce and leaders, lack of proper disclosure, and goodwill are also responsible for this situation, added the insiders. 

As a result, some companies failed to get funds and face challenges. 

"We will primarily suspend the IPO quota facility of those asset management companies that took licences but are not in operation," said BSEC Chairman Professor Shibli Rubayat-Ul-Islam.

"We may also cancel licences of those companies after an inquiry." 

Waqar Ahmad Choudhury, vice president at Association of Asset Management Companies and Mutual Funds, said there is negative propaganda in the mutual fund industry. 

"Many institutions are not interested in coming into the sector. As a result, newcomers are facing challenges to create funds and build confidence. Though the regulator is trying to minimise complexity to improve this sector," he added.

Emran Hasan, chief executive officer of Shanta Asset Management, said there is no sufficient skilled workforce and leaders to run so many asset management companies. Also, many sponsors acquired licences without any serious planning and vision. 

On top of that, most of our retail investors prefer to invest directly in the stock market than through professional fund managers or mutual funds, he added. 

"The current asset under management of the country's mutual fund industry is still too small for more than 50 asset management companies," said Emran Hasan. 

"However, I believe this sector will grow very fast in the next five years."  

Recently, the commission has decided to look into the business activities of Assurance Asset Management Ltd after getting anomalies in reports submitted to the regulator on behalf of the company. 

According to Investopedia, an asset management company invests pooled funds from clients into a variety of securities and assets.

AMCs vary in terms of their size and operations, from personal money managers to giant investment companies.

AMC managers are compensated via fees, usually a percentage of a client's assets under management. Most AMCs are held to a fiduciary standard. 

BSEC has provided 51 licences for asset management companies till 17 August 2021.

Besides, the commission has also provided 21 fund managers till 7 June 2021.

According to IDLC Asset Management Income Fund 2021, a mutual fund was first introduced by the Investment Corporation of Bangladesh, a public sector financial institution, in 1980. 

Later on, private companies started to enter the industry in 2000. 

There are only 37 close-end mutual funds and 64 open-end mutual funds in Bangladesh and total assets under management (AUM) is approximately Tk13,520 crore till March 2021, while in India the AUM is approximately Tk35,38,150 crore as of January 2021.